Exhibit 10.66


 


CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY
RESACA EXPLOITATION, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.  CONFIDENTIAL PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.  OMITTED PORTIONS ARE INDICATED IN THIS
AGREEMENT WITH “*****”.


 


GAS PURCHASE
CONTRACT


Between DUNE OIL &
GAS COMPANY as Seller


and GPM GAS
CORPORATION as Buyer


Dated the 17th day
of November, 1993


 


INDEX


 


	
   

  	
   

  	
  PAGE

  
	
  PARAGRAPH

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  COMMITMENT

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  POINT(S) OF
  DELIVERY AND DELIVERY DATE

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  DELIVERY PRESSURE

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  QUANTITY

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  PRICE

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  TERM

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  ADDRESSES AND NOTICES

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  GENERAL
  TERMS & CONDITIONS

  	
   

  	
  A-1

  
	
  A.

  	
  DEFINITIONS

  	
   

  	
  A-1

  
	
  B.

  	
  DELIVERY DATE

  	
   

  	
  A-2

  
	
  C.

  	
  RESERVATIONS OF SELLER

  	
   

  	
  A-2

  
	
  D.

  	
  METERING

  	
   

  	
  A-3

  
	
  E.

  	
  DETERMINATION OF GAS
  COMPOSITION

  	
   

  	
  A-3

  
	
  F.

  	
  QUALITY OF GAS

  	
   

  	
  A-3

  
	
  G.

  	
  BILLING AND PAYMENT

  	
   

  	
  A-4

  
	
  H.

  	
  FORCE MAJEURE

  	
   

  	
  A-4

  
	
  I.

  	
  TITLE,
  OWNERSHIP, AND RESPONSIBILITY FOR INJURY OR DAMAGE

  	
   

  	
  A-5

  
	
  J.

  	
  ROYALTY

  	
   

  	
  A-5

  
	
  K.

  	
  SEVERANCE AND SIMILAR
  TAXES

  	
   

  	
  A-5

  
	
  L.

  	
  LAWS AND REGULATIONS

  	
   

  	
  A-6

  
	
  M.

  	
  RIGHT OF WAY

  	
   

  	
  A-6

  
	
  N.

  	
  ASSIGNMENT

  	
   

  	
  A-6

  
	
  O.

  	
  MISCELLANEOUS
  PROVISIONS

  	
   

  	
  A-6

  
					



 


MEMORANDUM OF GAS
PURCHASE CONTRACT


 

















 


GAS PURCHASE CONTRACT


 


This Contract is entered as of this 17th day of
November, 1993 between DUNE OIL & GAS COMPANY
(“Seller”) and GPM GAS CORPORATION (“Buyer”).


 


For and in consideration of the mutual covenants
contained herein, the parties agree as follows:


 


1. COMMITMENT. 
Seller agrees to sell and Buyer agrees to purchase gas produced from
wells now or hereafter located on all oil and gas leasehold interests now or
hereafter owned or controlled by Seller on or allocated to the following lands
in Crane and Ector Counties, Texas:


 


See Exhibit “B” attached hereto and incorporated by
reference herein.


 


General terms and Conditions which are a part of this Contract are
attached as Exhibit A and incorporated by reference.


 


2. POINT(S) OF DELIVERY AND
DELIVERY DATE.  The Point(s) of Delivery of gas to be
delivered by Seller to Buyer for existing sources of production shall be at the
inlet flange of Buyer’s meter at a mutually agreeable site at or near Seller’s
sources of production.  The Point(s) of
Delivery for future sources of production will be established under Paragraph
B.2 of Exhibit A. Title to the gas and all its components shall pass to and
vest in Buyer at the Point(s) of Delivery.


 


3. DELIVERY PRESSURE. 
The gas shall be delivered by Seller at the Point(s) of Delivery at a
pressure sufficient to enable it to enter Buyer’s Facilities against the
working pressure at reasonably uniform rates of delivery.  Buyer will endeavor to maintain a working
pressure at the Point(s) of Delivery no greater than thirty (30) psig.


 


4. QUANTITY. 
(a) Seller shall deliver and Buyer shall purchase and take Seller’s gas
subject to the operating conditions and capacity of Buyer’s Facilities.
Although there is no specific purchase quantity, Buyer will diligently market
gas on resale and will operate its facilities in an effort to maintain
consistent takes of all available quantities. If Buyer takes less than the full
quantities available, Buyer will purchase gas from the lands covered by this
Contract ratably with its purchases of similar gas in each common gathering
system or area in compliance with applicable laws and regulation, including ratable
purchases from its affiliates.


 


(b) Seller may dispose of any gas not taken by Buyer
for any reason, including events of force majeure, subject to Buyer’s right to
resume purchases at any subsequent time. In the event Buyer does not take gas
for fifteen (15) consecutive days and Seller secures a different temporary


 

















 


market, Buyer may resume purchases only upon thirty (30) days advance
written notice as of the beginning of a month unless otherwise agreed.


 


(c) Seller will use all reasonable efforts to deliver
gas meeting the quality requirements and to avoid delivery of Inferior Liquids
as defined below. In the event the gas at any Point(s) of Delivery becomes
insufficient in volume, quality, or pressure, Buyer may cease gas takes so long
as the condition exists, or may terminate this Contract as to any such gas upon
thirty (30) days notice in writing to Seller. If Buyer ceases taking gas under
this Paragraph for thirty (30) consecutive days for reasons other than quality
[Ex. A Para. F(4)] or force majeure [Ex. A Para. H], Seller may terminate this
Contract with respect to the affected sources as to the then productive zones
upon thirty (30) days written notice to Buyer; provided that during the notice
period Buyer may resume consistent takes and purchases, and thereby avoid
Contract termination under Seller’s notice. 


 


5. PRICE


 


5.1 Consideration. ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** *****


 


5.2 Residue Gas Proceeds. ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** *****


 


2

















 


***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** *****


 


5.3 NGL Proceeds.  ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** *****


 


5.4 Allocation of Residue Gas and NGL’s; Buyer’s
Resales.  ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****


 


5.5 Low Volume Point(s) of Delivery. ***** *****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** *****(2)


 






(2) CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
BY RESACA EXPLOITATION, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.  CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. 
OMITTED PORTIONS ARE INDICATED IN THIS AGREEMENT WITH “*****”.


 


3

















 


*****
***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****
***** ***** ***** ***** ***** ***** *****(3)


 


5.6  Price
Renegotiation Rights.  Notwithstanding the foregoing provisions
of this Paragraph 5, PRICE, if at any time, and from time to time, Buyer in its
sole judgment determines that at any or all Point(s) of Delivery, operating
conditions relating to Buyer’s Facilities or market conditions relating to
Buyer’s purchase of gas or resale of residue gas and NGL’s indicate that a
downward price revision is necessary or appropriate, then Buyer may elect to notify
Seller of Buyer’s intent to renegotiate Seller’s price and pricing basis or to
terminate this Contract.  Any notice of
renegotiation of price or termination shall be given in writing by Buyer to
Seller not less than thirty (30) days prior to the proposed effective
date.  If Seller is not willing to accept
the renegotiated price nominated by Buyer, then as to all gas affected by
Buyer’s notice, Seller may (i) cause a renegotiation of pricing percentages or
(ii) terminate this Contract as to the affected gas by written notice to Buyer
at any time prior to the effective date of Buyer’s nominated price.  Whether or not such notice of termination is
given by Seller within the prescribed period, if Seller makes deliveries of and
Buyer accepts gas from the affected sources after the effective date of the
renegotiation, Buyer’s nominated price will be paid for such deliveries.


 


6.  TERM.  This Contract shall remain
in effect for a primary term expiring five (5) years following the last day of
the month in which this Contract is executed, and shall continue in effect from
year to year thereafter until cancelled by either party as of the end of the
primary term or any anniversary thereafter by giving the other party sixty (60)
days advance written notice.


 


7.  ADDRESSES AND NOTICES.  Either party
may give notices to the other party or parties by first class mail postage
prepaid, by overnight delivery service, or by facsimile at the following
addresses or other addresses furnished by a party by written notice.  Unless Seller objects in writing, Buyer may
also use Seller’s current address for payments.


 


	
  Notices
  to Seller:

  	
   

  
	
   

  	
  Dune
  Oil & Gas Company

  
	
   

  	
  P.
  O. Box 15122

  
	
   

  	
  Odessa,
  Texas 79768

  
	
   

  	
  Fax:                                 

  
	
   

  	
   

  
	
  Notices
  to Buyer - General:

  	
   

  
	
   

  	
  GPM
  Gas Corporation

  
	
   

  	
  Gas
  Acquisitions

  
	
   

  	
  4044
  Penbrook

  
	
   

  	
  Odessa,
  Texas 79762

  
	
   

  	
  Fax:
  (915) 368-1160

  



 






(3) CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
BY RESACA EXPLOITATION, INC. FOR CERTAIN PORTIONS OF THIS DOCUMENT.  CONFIDENTIAL PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.  OMITTED PORTIONS ARE INDICATED IN THIS
AGREEMENT WITH “*****”.


 


4

















 


	
  Accounting
  notices and inquiries only:

  	
   

  	
  GPM
  Gas Corporation

  Gas Purchase Accounting

  Bartlesville, Oklahoma 74004

  Fax: (918) 662-2747

  
	
   

  	
   

  	
   

  
	
  Ownership
  changes, Division Orders:

  	
   

  	
  GPM
  Gas Corporation

  Division Orders

  P.O. Box 5050

  Bartlesville, OK 74005

  Fax: (918) 662-8699

  



 


5

















 


IN
WITNESS WHEREOF, the parties have hereto set their hands in person or by their
duly authorized officials as of the date set forth above.


 


	
   

  	
  DUNE OIL & GAS
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Richard Beeson

  
	
   

  	
   

  	
  Richard Beeson

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  	
  SELLER

  
	
   

  	
   

  
	
   

  	
  GPM GAS CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Scharf

  
	
   

  	
   

  	
  David R. Scharf,
  Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
  BUYER

  
	
   

  	
   

  
	
  Executed on:
  November 20, 1993

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SIGNATURE PAGE FOR GAS
  PURCHASE CONTRACT

  	
   

  
	
  DATED THE 17TH DAY OF NOVEMBER, 1993

  	
   

  
				



 


6






 










 


EXHIBIT A 


TO GAS PURCHASE CONTRACT


BETWEEN GPM GAS CORPORATION AS BUYER 


AND DUNE OIL & GAS COMPANY AS SELLER


Dated the 17th day of November, 1993


 


GENERAL TERMS & CONDITIONS


 


A.    DEFINITIONS


 


Except
where the context indicates a different meaning or intent, the following terms
shall have meaning as follows:


 


a.     Affiliate -  a company (i) in which a party owns
directly or indirectly more than forty percent (40%) of the issued and
outstanding voting stock; or (ii) which owns directly or indirectly more
than forty percent (40%) of the issued and outstanding voting stock of the
party; or (iii) in which a company described in (ii) owns, directly
or indirectly, more than forty percent (40%) of the issued and outstanding
voting stock.


 


b.     Btu - British
Thermal Unit, or the quantity of heat required to raise the temperature of one (1) pound
of water one degree Fahrenheit (1°F) at a starting temperature of 59.5 degrees
Fahrenheit (59.5°F). MMBtu - one million Btu’s.


 


c.     Buyer’s Facilities -
The gas delivered by Seller will be gathered into gathering system(s) and
may be redelivered to a processing plant or plants for the removal of NGL’s
together with gas produced from other properties. The gathering system(s) and
plant or plants, or successor facilities, are defined as “Buyer’s Facilities”
whether owned by Buyer, an affiliate of Buyer, or an unaffiliated third party.
No facilities downstream of the processing plant or plants are included in “Buyer’s
Facilities.”


 


d.     Day - a period of
twenty four (24) consecutive hours beginning and ending at midnight Central
Time.


 


e.     Force Maleure - see
Paragraph H.2 below.


 


f.      Gas - all natural
gas available from the well(s) or acreage subject to this Contract which
arrives at the surface in the gaseous phase, including all hydrocarbon and
non-hydrocarbon components, casinghead gas produced from oil wells, gas well
gas, stock tank vapors, and other sources of production, unless specifically
excluded in the Commitment Paragraph above.


 


g.     Inferior Liquids -
Some mixed crude oil, slop oil, salt water, other nuisance liquids, and other
liquids recovered by Buyer in its gathering system or at plant inlet receivers
of insufficient quality for delivery into NGL pipelines. Revenues from Inferior
Liquids will be retained by Buyer to defray costs of treating and handling;
Buyer will not allocate or pay for Inferior Liquids.


 


h.     Mef - One thousand
(1,000) cubic feet of gas at a standard condition of 60°F and 14.65 psia.


 


i.      Month - a calendar
month.


 


j.      NGL or NGL’s
- ethane and heavier liquefiable hydrocarbons separated from gas. See Paragraph
5.3(i) through (v) for particular components.


 


k.     NGL’s Allocable to
Seller. The quantity of each NGL component allocable to Seller’s gas shall
be determined by multiplying the total quantity of each NGL component saved and
sold at the plant or plants by a fraction. The anmerator will be the gallons of
that NGL component contained in the gas delivered by Seller as determined by
chromatographic analysis or other accepted method in the industry, and the
denominator will be the total gallons of that component contained in all gas
delivered to Buyer from sources connected to Buyer’s Facilities.


 


l.      Point(s) of
Delivery - see Paragraphs 2, B.1, and B.2.


 


m.    psi -  pounds per square inch; psia - psi
absolute; psig - psi gauge.


 


n.     Residue gas -
merchantable gas available for sale from Buyer’s Facilities after processing
and gas resold without first being processed.


 


o.     Residue Gas Allocable to
Seller. The MMBtu’s of “residue gas allocable to Seller” will be
determined by multiplying the MMBtu’s of “residue gas available for sale” from
Buyer’s Facilities by a fraction. The numerator will be the “theoretical MMBtu’s
of residue gas remaining from Seller’s gas” delivered by Seller, and the
denominator will be the total of the theoretical MMBtu’s of residue gas
remaining from all gas delivered to Buyer from the common sources connected to
Buyer’s Facilities. “Residue gas available for sale” means all residue
gas available from Buyer’s Facilities, net of residue gas required for the
operation of Buyer’s Facilities. The “theoretical MMBtu’s of residue gas
remaining from Seller’s gas” means the sum of the MMBtu’s of methane and
heavier hydrocarbons contained in Seller’s gas as determined by chromatographic
analysis or other accepted method in the industry, less the MMBtu’s of NGL’s
saved and sold attributable to Seller’s gas. For any gas delivered


 


A-1

















 


initially
into a high-pressure gathering system, unless subarea allocations to low
pressure sources or other methods are used, Seller’s theoretical MMBtu’s of
residue gas remaining shall be adjusted upward by four percent  (4%) to recognize the fuel economies realized by Buyer’s
avoidance of compression for these high pressure deliveries.


 


p.     TET - price quotes
for NGL on the Texas Eastern Transmission Company system.


 


q.     TF&S -
Transportation, fractionation, and storage, see Paragraph 5.3.


 


B.    DELIVERY DATE


 


B.1   
As to sources of production existing as of the date of this Contract, Seller
shall commence and prosecute with due diligence the construction of such
facilities as may be necessary to enable Seller to deliver at the Point(s) of
Delivery the committed quantities of gas, and Buyer shall cause prompt
commencement and prosecute with due diligence the construction of such
facilities as are necessary and economically feasible to enable Buyer or its
gas gathering contractor to receive deliveries of gas at the Point(s) of
Delivery. In the event Buyer has not commenced construction within thirty (30)
days from the date Buyer receives notice of completion of Seller’s facilities
necessary to make deliveries, Seller’ may terminate this Contract upon
immediate written notice. This option expires upon Buyer’s commencement of
construction.


 


B.2   Additional
Sources of Production. As to sources of production acquired, drilled, or
discovered after the date of this Contract, Seller shall commence and prosecute
with due diligence the construction of such facilities as may be necessary to
enable Seller to deliver gas at the Point(s) of Delivery then agreed.
Buyer shall cause prompt commencement and prosecute with due diligence the
construction of such facilities as are necessary and economically feasible to
enable Buyer or its gas gathering contractor to receive deliveries of gas at
the added Point(s) of Delivery. If Buyer determines it is not profitable
to construct such facilities. Seller shall have the option to construct
facilities necessary to deliver into Buyer’s then existing facilities. In the
event neither Buyer nor Seller elect to construct the necessary facilities,
either party may cancel this Contract as to the affected gas upon written
notice to the other.


 


B.3   Delivery
Rates. Seller shall have agents or employees available at all reasonable
times to receive from Buyer’s dispatchers advice and requests for changes in
the rates of delivery of gas as required by Buyer from time to time.


 


B.4   Options
to Compress. If Seller’s wells become incapable of delivering gas into
Buyer’s Facilities, neither party shall be obligated to compress, but either
party shall have the option to do so. A party providing compression facilities
shall also provide sufficient pulsation dampening equipment so that measurement
at the Point(s) of Delivery will not be affected by pulsation. If neither
party elects to compress within a reasonable time after the need for
compression appears, Buyer upon written request of Seller shall release the
affected gas sources as to the then-producing formation(s) from commitment
under this Contract.


 


C.    RESERVATIONS OF SELLER


 


C.1   Reservations.   Seller
reserves the following rights with respect to its interests in the oil and gas
properties committed by Seller to Buyer under this Contract together with
sufficient gas to satisfy such rights:


 


a.     To operate Seller’s oil and
gas properties free from control by Buyer in such manner as Seller, in Seller’s
sole discretion, may deem advisable, including without limitation the right,
but never the obligation, to drill new wells, to repair and rework old wells,
renew or extend, in whole or in part, any oil and gas lease covering any of the
a oil and gas properties, and to abandon any well or surrender any such oil and
gas lease, in whole or in part, when no longer deemed by Seller to be capable
of producing gas in paying quantities under normal methods of operation.


 


b.     To use gas for developing
and operating Seller’s oil and gas properties committed under this Contract and
to fulfill obligations to Seller’s lessors under those properties.


 


c.     To pool, combine and
unitize any of Seller’s oil and gas properties with other properties in the
same field, and to alter such pooling, combination, or units, in which event
this Contract will cover Seller’s allocated interest in unitized production
insofar as that interest is attributable to the oil and gas properties
committed under this Contract, and the description of property covered hereby
shall be considered to have been amended accordingly.


 


C.2   Exception.
Notwithstanding the above, Seller agrees not to engage in any operation,
including without limitation, reinjection, recycling, or curtailment, that
would materially reduce the amount of gas available for sale to Buyer except
upon 120 days advance written notice to Buyer or as much advance notice as is
feasible under the circumstances. In the event Seller ceases or materially
curtails deliveries to Buyer under this Paragraph C, the Contract term shall be
extended by the duration of any such interruption or curtailment. Buyer shall
own and be entitled to collect and pay Seller for any NGL’s which condense or
may be condensed or manufactured from gas during any of Seller’s operations,
excluding crude oil and distillate recovered from gas by conventional type
mechanical separation equipment and not delivered to Buyer.


 


A-2

















 


D.    METERING


 


D.1   Buyer
to Install Meters(s). Buyer shall install, maintain and operate, at or
near the Point(s) of Delivery, orifice meter(s) or other measuring
devices of standard make. Seller, insofar as Seller’s leasehold and other
mineral rights enable it to do so, will furnish Buyer sites for is metering
facilities. Except as otherwise specifically provided to the contrary in this
paragraph, orifice meters or other measurement devices shall be installed and
volumes computed in accordance with accepted industry practice. Electronic
recording devices such as TotalflowTM or the like
may be used. Seller shall have access to Buyer’s metering equipment at
reasonable hours, but reading, calibrating, adjusting, operation, and
maintenance shall be done only by Buyer.


 


D.2   Unit
of Volume. The unit of volume shall be one (1) cubic foot of gas at a
base temperature of sixty degrees Fahrenheit (60°F) and at a pressure base of
14.65 psia. Computation of volumes shall be made in accordance with industry
accepted practice.


 


D.3   Pressure,
Temperature. Buyer may measure the atmospheric pressure or may assume the
atmospheric pressure to be thirteen and two-tenths pounds per square inch absolute
(13.2) psia. Buyer may determine the temperature of the gas by using a
recording thermometer, otherwise, the temperature shall be assumed to be sixty
degrees Fahrenheit (60°F). The specific gravity
shall be determined semiannually or more often as Buyer deems advisable.


 


D.4   Check
Meter(s). Seller many install, maintain, and operate in accordance with
accepted industry practice at its own expense pressure regulators and check
measuring equipment of standard make. Check meters shall not interfere with
operation of Buyer’s equipment. Buyer shall have access to Seller’s check
measuring equipment at all reasonable hours, but reading, calibrating,
adjusting, operation, and maintenance shall be done only by Seller.


 


D.5   Meter
Tests. At least twice each year Buyer shall verify the accuracy of Buyer’s
measuring equipment, and Seller or its lease operator shall verify the accuracy
of any check measuring equipment. If Seller’s lease operator or Buyer notifies
the other that if desires a special test of any measuring equipment, they shall
cooperate to secure a prompt verification of the accuracy of the equipment. If
either at any time observes a variation between the delivery meter and the
check meter, it will promptly notify the other, and both will then cooperate to
secure an immediate verification of the accuracy of the equipment. Buyer and
Seller’s lease operator shall give the other reasonable advance notice of the
time of all tests and calibrations of meters and of sampling for determinations
of gas composition and quality so that the other may conveniently have its
representatives present to witness tests and sampling or to make joint and
obtain samples with its own equipment.


 


D.6   Correction
of Errors. If at any time any of the measuring or testing equipment is
found to be out of service or registering inaccurately in any percentage, it
shall be adjusted at once to read accurately within the limits prescribed by
the manufacturer. If any measuring equipment shall be found to be inaccurate or
out of service by an amount exceeding two percent (2%) at a recording
corresponding to the average hourly rate of flow for the period since the last
test, then previous recordings shall be corrected to zero error for any known
or agreed period. The volume of gas delivered during such period shall be
estimated by (i) using the data recorded by and check measuring equipment
if registering accurately, (ii) by correcting the error if the percentage
of error is ascertainable by calibration, test or mathematical calculation: or
if neither such method if feasible, (iii) by estimating the quantity or
quality delivered based upon deliveries under similar conditions during a
period when the equipment was registering accurately. No adjustment shall be
made for recorded inaccuracies of two percent (2%) or less.


 


D.7   Meter
Records. The parties shall preserve for a period of at least two (2) years
all test data, charts and other similar records. The parties shall raise
metering questions as soon as practicable after the time of production. No
party shall have any obligation to preserve metering records for more than two (2) years
except to the extent that a metering question has actually arisen and remains
unresolved.


 


E.              DETERMINATION
OF GAS COMPOSITION


 


E.1   Semiannually,
or more often as Buyer deems advisable. Buyer shall obtain a representative
sample of Seller’s gas delivered at each Point of Delivery, or Buyer may use
continuous samplers. By means of chromatography or other accepted method in the
industry, Buyer will determine the composition and gross heating value of
Seller’s gas in Btu per cubic foot on a water saturated bases. The Btu content
for Buyer’s residue gas resales will be on an as-sold basis. The first
determination of Btu content for Seller’s deliveries shall be made within a
reasonable time after delivery of gas begins. If continuous samplers are used,
the determinations will apply to the gas delivered while the sample was
installed. If not, the determination will apply until the first day of the
month following the next determination.


 


F.              QUALITY
OF GAS


 


F.1   Quality
Specifications. The gas shall be merchantable natural gas, at all times
complying with the following quality requirements. The gas shall:


 


a.
Be practically free of crude oil, water in the liquid phase, other liquids,
brine, air, impurities, and other objectionable substances.


 


A-3






 










 


b.     Not
contain more than one fourth (1/4) grain of hydrogen sulphide per 100 cubic
feet of gas.


 


c.     Not
contain more than five (5) grains of total sulfur not more than one (1) grain
of mercaptan per one hundred (100) cubic feet of gas.


 


d.     Not
contain in excess of two mole percent (2%) of carbon dioxide.


 


e.     Not
contain in excess of three mole percent (3%) of nitrogen.


 


f.      Not
contain in excess of ten parts per million (10 ppm) by volume of oxygen.


 


g.     Not
contain more than five mole percent (5%) of combined carbon dioxide, nitrogen,
and oxygen.


 


h.     Not exceed
one hundred and twenty degrees Fahrenheit (120oF) in temperature at the Point
of Delivery.


 


i.      Have a
total heating value of not less than one thousand and fifty (1,050) Btu’s per
cubic foot.


 


F.2      Quality Tests. Determinations as to
conformity of the gas with the above specifications shall be made by Buyer in
accordance with generally accepted procedures of the gas industry. Such
determinations shall be made as often as Buyer reasonably deems necessary. If
in the lease operator’s judgment the result of any such test or determination
is inaccurate, Buyer upon request will again conduct the questioned test or
determination. The costs of the additional test or determination shall be borne
by Seller unless it shows the original test or determination to have been
materially inaccurate.


 


F.3      Separation Equipment. Seller agrees
to employ only conventional mechanical separation equipment on any of the
leases covered by this Contract. Low temperature, absorption, and similar
separation facilities are not considered conventional mechanical separation
equipment. Except for liquids removed through operation of conventional
mechanical separators and except for removal of substances as required to
enable Seller to comply with this Paragraph, no components of the gas shall be
removed prior to delivery to Buyer.


 


F.4      Rights as to Off Specification Gas.
If any of the gas delivered by Seller should fail to meet the quality
specifications stated in this Paragraph, Buyer may at its option accept
delivery of and pay for such gas or discontinue or curtail Seller’s delivery of
off specification gas whenever its quality does not conform to the quality
specifications. If Buyer accepts delivery of off specification gas from Seller
or incurs costs relating to inferior gas quality in its gathering system, Buyer
may deduct from the proceeds otherwise payable a fee to cover the actual and
reasonable costs incurred by Buyer to monitor the gas quality and to bring the
gas within the quality specifications. If a gas quality issue arises and Seller
concludes that it cannot economically deliver gas conforming to the
specifications, Seller shall promptly so advice Buyer in writing. Within thirty
(30) days of receipt of such a notice from Seller, Buyer shall give notice to
Seller in writing of its election to accept or reject delivery of such gas. If
Buyer rejects delivery, then Buyer’s notice will terminate this Contract with
respect to the off specification gas named in the notice.


 


G.    BILLING
AND PAYMENT


 


G.1      Statement and Payment Date. Buyer
shall render to Seller on or before the fifteenth (15th) working day of each
month a statement showing the volume of gas delivered by Seller during the
preceding month. Buyer shall make payment to Seller on or before the last day
of each month for all gas delivered during the preceding month. As between the
parties, late payments by Buyer and recoupments/refunds from Seller shall carry
simple interest at the lesser of six percent (6%) per annum or the maximum
lawful interest rate; provided that no interest shall accrue as to monthly
principal amounts of less than $1,000 due for less than one year when paid.


 


G.2      Audit Rights: Time Limit to Assert
Claims. Each party shall have the right at reasonable hours to examine the
books, records and charts of the other party and to review its own records to
the extent necessary to verify performance of this Contract and the accuracy of
any statement, charge or computation made pursuant to the provisions of this
Contract. If any such examination reveals any inaccuracy in any payment, the
appropriate adjustment in the billing and payment shall be promptly made;
provided that no adjustment for any billing or payment shall be made and
payments shall be considered final after the lapse of two (2) years from the
rendition thereof except to the extent that (i) either party has noted a
specific exception to the other party in writing during that period, or (ii)
additional adjustments are required by law with respect to severance tax and
royalty liabilities.


 


G.3      Conflict of Interest. Seller, its
employees and agents have not and shall not pay any commissions, fees, or grant
any rebates to any employee, officer, or agent of Buyer nor favor them with
gifts or entertainment of significant cost or value, nor enter into any
business arrangement with employees, officers, or agents of Buyer other than as
a representative of Buyer without Buyer’s written approval.


 


G.4      Metering Records Availability.
Buyer shall not be required to furnish gas volume records relating to
electronic recording devices such as Totalflow other than daily volume
information except to the extent that there are indications the meter was not
operating properly.


 


H.    FORCE
MAJEURE


 


H.1     Suspension of Performance. In the event
either party is rendered unable, wholly or in part, by


 


A-4

















 


force
majeure to carry out its obligations under this Contract, other than to make
payments due, the obligations of that party, so far as they are affected by
force majeure, shall be suspended during the continuance of any inability so
caused but for no longer period.


 


H.2     Force Majeure
Definition. The term “force majeure” shall mean acts of God, strikes,
lockouts or other Industrial disturbances., acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
storms, floods, washouts, arrests and restraints of governments and people,
civil disturbances, fires, explosions, breakage or accidents to machinery or
lines of pipe, freezing of wells or lines of pipe, partial or entire failure of
wells or sources of supply of gas, inability to obtain at reasonable cost
servitudes, right of way grants, permits, governmental approvals, or licenses,
inability to obtain at reasonable cost materials or supplies for constructing
or maintaining facilities, and other causes, whether of the kind herein
enumerated or otherwise, not within the control of the party claiming
suspension and which by the exercise of due diligence the party is unable to
prevent or overcome.


 


H.3     Labor Matters Exception.
The settlement of strikes or lockouts shall be entirely within the discretion
of the party having the difficulty, and settlement of strikes, lockouts, or
other labor disturbances when that course is considered inadvisable is not
required.


 


I.      TITLE OWNERSHIP AND
RESPONSIBILITY FOR INJURY OR DAMAGE


 


I.1       Warranty of Title,
Title Information. Seller warrants that it has good title to the gas
delivered hereunder free and clear of any and all liens, encumbrances, and
claims whatsoever, and that Seller has good right and lawful authority to sell
the same. Seller agrees to defend, indemnify, and save Buyer harmless from any
and all suits, claims, items and encumbrances of whatsoever nature relating to
the gas or title thereto. If Buyer requests, Seller shall furnish Buyer a
current attorney’s division order title opinion, together with other title
information reasonably requested by Buyer. As between the parties, Buyer shall
not be required to make payment until Seller has furnished the title
information requested. Until such title information is furnished, or if Seller’s
title or right to receive any payment is questioned or involved in litigation.
Buyer shall have the right to withhold payment without interest until title
information is received, during the pendency of litigation, until the title or
right to receive the questioned payment(s) is freed from question, or
until Seller furnishes bond with surely acceptable to Buyer. Without impairment
of Seller’s warranty of title, if Seller owns less than full title to the gas
delivered, payments shall be made only in the proportion that Seller’s interest
bears tot he entire title to the gas.


 


I.2       Responsibility for
Injury or Damage. As between the parties, Seller shall be in control and
possession of the gas deliverable hereunder and responsible for any injury or
damage caused thereby until the same shall have been delivered to Buyer, after
which delivery Buyer shall be deemed to be in exclusive control and possession
and responsible for any injury or damage caused thereby, provided that neither
party shall be indemnified for its own negligence.


 


J.     ROYALTY


 


J.1       Seller’s
Responsibility. Seller is responsible for all payments to the owners of all
royalties, overriding royalties, bonus payments, production payments and the
like. Seller agrees to defend, indemnify, and hold Buyer harmless from any and
all liabilities to those owners.


 


J.2       Buyer’s Payment
Services. At Seller’s request, Buyer agrees to disburse such royalties,
overriding royalties, bonus payments, production payments, and the like as Seller
shall from time to time direct on Seller’s behalf. In return for this service,
Buyer shall retain from the proceeds otherwise due Seller a monthly fee of
thirty dollars ($30.00) per well or other settlement payment basis. Buyer
reserves the right to adjust this fee upon advance written notice to Seller.
Seller may at any time upon reasonable advance written notice cease Buyer’s
payment services and itself assume such payments effective as of the first day
of a month.


 


J.3       Buyer’s Reliance on
Ownership Information. Buyer shall not commence payments for any month
under Paragraph J.2 until thirty (30) days after receipt from Seller of all
title information and executed payment directions necessary for such payments.
Payments on behalf of Seller shall include penalties and interest when payable
under applicable laws or regulations. Buyer shall deduct all such payments,
penalties, and interest from the amounts otherwise due Seller hereunder. Buyer
assumes no direct liability to Seller’s royalty or other interest owners.
Seller agrees to defend, indemnify, and hold Buyer barmless from any and all
loss and damages resulting from payments made pursuant to Seller’s directions
or pursuant to title information received from or through Seller. Buyer may at
any time upon at least thirty (30) days advance written notice cease
disbursements on behalf of Seller under Paragraphs J.2 and J.3 as of the end of
any month.


 


K.    SEVERANCE AND SIMILAR
TAXES


 


K.1     Included in Price.
Reimbursement to Seller for Seller’s full liability for severance and similar
taxes levied upon seller’s gas production shall be


 


A-5

















 


deemed
to be included in the prices payable under paragraph 5 of this Contract.


 


K.2     Tax Responsibilities an
Disbursements. Seller shall bear all taxes imposed upon Seller with respect
to the gas delivered hereunder, and Buyer shall bear all taxes imposed upon
Buyer with respect to such gas after delivery to Buyer. Unless otherwise
required by law, severance and similar taxes that are payable on a monthly
basis and are based upon the value or volume of the gas produced and sold by
Seller shall be computed and paid by Buyer for the account of Seller, and Buyer
shall deduct such payments from the amounts due Seller.


 


K.3     Seller’s Option to
Disburse Severance Taxes. If Seller is paying royalties under Paragraph j
and if permitted by law, Seller may elect at any time to pay severance and
similar taxes to the proper authority effective as of the first day of a month.
Seller shall notify Buyer in writing at least thirty (30) days in advance of
Sellers’ intended effective date of commencement of remittances of taxes by
Seller.


 


L.    LAWS AND REGULATIONS


 


L.1      Compliance with Laws
and Regulations. This Contract is subject to all valid statutes and rules and
regulations of my duly constituted federal or state authority or regulatory
body having jurisdiction. Neither party shall be in default as a result of
compliance with laws and regulations. For purposes of Paragraph 5.2 any gas for
which the selling price is affected by price controls shall be calculated and
paid for in separate resale pools by price category.


 


M.   RIGHT OF WAY


 


M.1    Grant of Access.
Insofar as Seller’s lease or leases permits and insofar as Seller may have any
rights however derived (whether pursuant to governmental agency order,
regulation, statute, or otherwise), Seller grants to Buyer and Buyer’s gas
gathering contractor, if any, and their assignees the right of free entry and
the right to lay and maintain pipelines and any equipment on the lands or
leases subject to this Contract as reasonably necessary in connection with the
purchase and handling of Seller’s gas. All pipelines and other equipment placed
by Buyer or Buyer’s contractor on said lands and leases shall romain the
property of the owner and may be removed by the owner at any time.


 


N.    ASSIGNMENT


 


N.1     Binding Assignees.
This Contract may be assigned by either party. This Contract shall be binding
upon and inure to the benefit of the successors, assigns, heirs, personal
representatives, and representatives in bankruptcy of the parties, and shall
constitute a real right and covenant running with the lands and oil and gas
properties covered and shall be binding upon any purchases of Buyer’s
Facilities and upon any purchaser of the properties of Seller subject to this
Contract, provided however, that nothing contained in this Paragraph shall in
any way prevent either party from mortgaging its rights hereunder as security
for its indebtedness, such security to be subordinate to the rights and
obligations under this Contract.


 


N.2     Notice of Assignment.
Any assignment or sublease by Seller of any oil and gas properties or any gas
rights contracted to Buyer shall be made expressly subject to the provisions of
this Contract. No transfer of or succession to the interest of Seller, however
effected, shall bind Buyer unless the original instrument or other proper proof
that the claimant is legally entitled to an interest shall have been furnished
Buyer at its office in Odessa, Texas.


 


O.    MISCELLANEOUS PROVISIONS


 


O.1     Governing Law. THIS
CONTRACT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE WHERE THE GAS IS PRODUCED, EXCLUDING ANY PROVISIONS WHICH WOULD OTHERWISE
REQUIRE THE APPLICATION OF THE LAW OF A DIFFERENT JURISDICTION.


 


O.2     Default and Nonwaiver.
A waiver by a party of any one or more defaults by the other in the performance
of any provisions of this Contract will not operate as waiver of any future
default or defaults, whether of a like or different character.


 


O.3     Counterparts. This
Contract may be executed in any number of counterparts, all of which shall be
considered together as one instrument, and this Contract shall be binding upon
all parties executing the same, whether or not executed by all parties owning
an interest in the oil and gas properties.


 


O.4     Entire Agreement.
This Contract constitutes the final and complete agreement between the parties.
There are no oral promises, prior agreements, understandings, obligations,
warranties, or representations between the parties relating to this Contract
other than those set forth herein.


 


O.5.    Negotiations. The
language of this Contract shall not be construed in favor of or against either
Buyer or Seller, but shall be construed as if the language were mutually
drafted by both parties.


 


O.6     Ratification. If
requested in writing by Buyer of other interest owners, this Contract may be
ratified and adopted by any owner of an interest in any oil and gas properties
subject to this Contract or any lands or leases with which those oil and gas
properties may be pooled or unitized, by execution and delivery to Buyer of an
instrument in writing ratifying and adopting this Contract insofar as the owner’s
interest in any such land, lease or oil and gas properties is concerned, and
the ratifying owner shall become a party Seller to this


 


A-6

















 


Contract
with like force and effect as though the owner had executed this Contract as of
the time of execution of the ratification, and all of the terms and provisions
of this Contract as amended to the date of the ratification shall become
binding upon Buyer and any such other owner.


 


O.7     Dispute Resolution;
Fees and Costs. The parties desire to resolve any disputes that may arise
without a need for litigation, if possible. To that end, in the event a dispute
arises, each party will appoint an employee to negotiate with the other party
concerning the dispute. If the dispute cannot be so resolved in a reasonable
time, the parties may agree to non-binding mediation, binding arbitration, or
either party may file a suit to resolve the matter. In the event mediation, arbitration,
or litigation is necessary to resolve a dispute, in addition to actual damages,
the prevailing party shall be entitled to recover its reasonable attorneys’
fees and costs from the other party.


 


O.8     Mutual Waiver of
Certain Remedies. NEITHER PARTY SHALL BE LIABLE OR OTHERWISE RESPONSIBLE TO
THE OTHER FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES, FOR LOST PRODUCTION, OR FOR
PUNITIVE DAMAGES AS TO ANY ACTION OR OMISSION, WHETHER CHARACTERIZED AS A
CONTRACT BREACH OR TORT, WHICH ARISES OUT OF OR RELATES TO THIS CONTRACT OR ITS
PERFORMANCE OR NONPERFORMANCE.


 


END
OF EXHIBIT A TO GAS PURCHASE CONTRACT


 


A-7














 


EXHIBIT “B”


 


Attached to and made a part of the Gas
Purchase Contract dated the 17th day of November, 1993, between DUNE OIL & GAS COMPANY (“Seller”) and GPM GAS CORPORATION (“Buyer”).


 


DESCRIPTION
OF OIL AND GAS LEASES NOW COVERED BY ABOVE CONTRACT


 


JORDAN
(SAN ANDRES) UNIT


Block
35, University Lands


Crane
and Ector Counties, Texas


 




	
  TRACT

  	
   

  	
  Description

  
	
  01

  	
   

  	
  NE/4 SECTION 06

  
	
  02

  	
   

  	
  SE/4 SECTION 06

  
	
  03

  	
   

  	
  NW/4 SECTION 09

  
	
  04

  	
   

  	
  NW/4 SECTION 14

  
	
  05

  	
   

  	
  E/2 SW/4 SECTION 14

  
	
  06

  	
   

  	
  SW/4 SECTION 13

  
	
  07

  	
   

  	
  SE/4 SECTION 13

  
	
  08

  	
   

  	
  NW/4 SECTION 12

  
	
  09

  	
   

  	
  W/2 SE/4 SECTION 14

  






 

















 


MEMORANDUM
OF GAS PURCHASE CONTRACT


 


Notice is hereby given of
the following Gas Purchase Contract:


 


1.                                       SELLER:   DUNE OIL & GAS COMPANY


2.                                       BUYER:   GPM GAS CORPORATION


3.                                       DATE
OF CONTRACT:   17th day of November, 1993


4.                                       COMMITMENT:   All gas from all wells located on the
following acreage: Crane and Ector Counties, Texas


See Exhibit “B” attached
hereto and incorporated by reference herein.


5.                                       TERM:   A primary term ending November 30, 1998 and
from year to year thereafter until cancelled by either party by sixty (60) days
advance written notice.


6.                                       RIGHT
OF WAY:   Seller has granted rights of way and rights
of access to Buyer to own and operate gathering lines and other equipment on
the described lands. The lines and equipment remain the property of Buyer
during and after termination of the Contract.


7.                                       Further
information concerning the Gas Purchase Contract is available from GPM Gas
Corporation, Gas Acquisitions, 4044 Penbrook, Odessa, Texas 79762.


 


IN WITNESS WHEREOF, Seller
has executed this memorandum for recording in the records of the described
County.


 


	
   

  	
  DUNE OIL & GAS COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Richard Beeson

  
	
   

  	
   

  	
  Richard Beeson

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
  SELLER

  



 


	
  STATE OF Texas

  	
  )

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF Midland

  	
  )

  



 


BEFORE ME, the undersigned
Notary Public in and for said County and State, on this 17th day of December,
1993, personally appeared Richard Beeson, to me known to be the identical
person who executed the foregoing instrument as President of DUNE OIL & GAS COMPANY, and duly acknowledged to me that
he executed the same as his free and voluntary act and deed and as the
voluntary act and deed of said corporation for the uses and purposes therein
set forth.


 


GIVEN UNDER MY HAND AND SEAL
OF OFFICE the day and year last above written.


 


 


	
   

  	
  /s/ [ILLEGIBLE]

  
	
   

  	
  Notary
  Public

  



 

















 


EXHIBIT
“B”


 


Attached to and made a part of the Gas
Purchase Contract dated the 17th day of November, 1993, between DUNE OIL & GAS COMPANY (“Seller”) and GPM GAS CORPORATION (“Buyer”).


 


DESCRIPTION
OF OIL AND GAS LEASES NOW COVERED BY ABOVE CONTRACT


 


JORDAN
(SAN ANDRES) UNIT


Block
35, University Lands


Crane
and Ector Counties, Texas


 




	
  TRACT

  	
   

  	
  Description

  
	
  01

  	
   

  	
  NE/4 SECTION 06

  
	
  02

  	
   

  	
  SE/4 SECTION 06

  
	
  03

  	
   

  	
  NW/4 SECTION 09

  
	
  04

  	
   

  	
  NW/4 SECTION 14

  
	
  05

  	
   

  	
  E/2 SW/4 SECTION 14

  
	
  06

  	
   

  	
  SW/4 SECTION 13

  
	
  07

  	
   

  	
  SE/4 SECTION 13

  
	
  08

  	
   

  	
  NW/4 SECTION 12

  
	
  09

  	
   

  	
  W/2 SE/4 SECTION 14